The bidding for Continental Airlines heated up Tuesday, with Aeromexico announcing that it has agreed to join a group led by corporate raider Charles Hurwitz in an improved $400-million offer for the carrier. Continental later announced that a bid submitted by Air Canada and a group led by a pair of Ft. Worth investors had been increased by $25 million Monday to $425 million.

More planes began taking off from airports across Europe on Tuesday after days of enforced idleness, but a new cloud of volcanic ash moving toward the continent has thrown into doubt any resumption of normal service. Air France said it would operate all of its regularly scheduled long-haul flights out of Paris on Tuesday, as well as some shorter hops within the country and to destinations in southern Europe. Lufthansa Airlines said it would go ahead with dozens of intercontinental flights out of various German airports, many of them bound for the U.S. The carrier said it would run some domestic routes and intra-European journeys also.

The Ethiopian arrested for hijacking a Lufthansa jet was able to smuggle a gun aboard the plane by hiding it in a wide-brimmed Indiana Jones hat as he went through tight security at the airport in Frankfurt, Germany, a prosecutor said Friday. Court papers said 20-year-old Nebiu Zewolde Demeke took his hat off and passed it around the metal detector he went through at the airport, thus avoiding detection.

Lufthansa German Airlines and Los Angeles financier Marvin Davis became the latest bidders for Continental Airlines, submitting a $400-million joint proposal Wednesday for the troubled carrier. It isn't the first time Davis has shown interest in buying an airline. Several years ago, the former owner of 20th Century Fox made separate, unsuccessful bids for the parent companies of Northwest Airlines and United Airlines.

At least two investor groups met a Monday deadline to make formal bids for Continental Airlines, giving the carrier a choice between reorienting itself toward Canada or Mexico. At the same time, Lufthansa German Airlines, which had shown an interest in making a formal bid with Los Angeles businessman Marvin Davis, dropped out on Monday.

Pan American World Airways has been holding talks with Lufthansa German Airlines regarding the possible sale of all or part of Pan Am's profitable West Berlin service. Pan Am spokesman Jeffrey Kriendler declined to comment on a report in two West German publications, the prestigious Munich daily Suddeutsche Zeitung and a trade publication, concerning such talks. However, Lufthansa confirmed that such discussions were under way.

Airport services provider Hudson General Corp. said it received two more takeover offers, bringing the total to four and sending its stock soaring. The latest bids came from GlobeGround, a unit of German airline Lufthansa, and from New York-based Ogden Corp. GlobeGround offered $116.9 million, or $67 a share, in cash, while Ogden bid $113.4 million, or $65 a share, payable either in cash or Ogden shares. Lufthansa already owns 49% of Hudson General's aviation services unit.

A high-stakes battle may be developing between United Airlines and rival American Airlines over Canada's largest air carrier. United's parent, UAL Corp., and German airline Lufthansa are preparing a bid to buy 35% or more of the outstanding shares of Air Canada, the Chicago Tribune reported in Sunday's editions. The bid, which could come as early as today, could block the merger of Air Canada and Canadian Airlines proposed by Toronto-based investment firm Onex Corp.